Psara Energy, Ltd. v. Space Shipping, Ltd.

427 F.Supp.3d 858

PSARA ENERGY, LTD., Plaintiff,

v.SPACE SHIPPING, LTD., et al., Defendants.

CASE NO. 1:18-CV-00178-MAC

United States District Court, E.D. Texas.

Signed January 4, 2019

ORDER OVERRULING PLAINTIFF'S OBJECTIONS TO REPORT AND RECOMMENDATION GRANTING THE ADVANTAGE DEFENDANTS' MOTION FOR REFERRAL TO ARBITRATION

MARCIA A. CRONE, UNITED STATES DISTRICT JUDGE

The court referred this case to the Honorable Zack Hawthorn, United States Magistrate Judge, for pretrial management. Doc. No. 9. Pending before the court is the Defendants', Advantage Arrow Shipping, LLC, Advantage Holdings, LLC, Advantage Tankers, LLC, and Forward Holdings, LLC (collectively the Advantage Defendants), "Motion for Referral to Arbitration." Doc. No. 29. On November 21, 2018, Judge Hawthorn entered a report (Doc. No. 37) recommending the court direct the parties to arbitrate their dispute in London, pursuant to the charter party and Section 206 of the Federal Arbitration Act (FAA), and retain jurisdiction only to enter a decree on any arbitral award, pursuant to Sections 8 and 207 of the FAA.

A party who files timely, written objections to a magistrate judge's report and recommendation is entitled to a de novo determination of those findings or recommendations to which the party specifically objects. 28 U.S.C. § 636(b)(1)(C) ; FED. R. CIV. P. 72(b)(2)-(3). "Parties filing objections must specifically identify those findings [to which they object]. Frivolous, conclusive or general objections need not be considered by the district court." Nettles v. Wainwright , 677 F.2d 404, 410 n.8 (5th Cir. 1982) (en banc), overruled on other grounds by Douglass v. United Servs. Auto. Ass'n , 79 F.3d 1415 (5th Cir. 1996) (en banc).

Plaintiff Psara Energy, Ltd. (Psara) raises four objections to Judge Hawthorn's report, but these objections are largely a restatement of the arguments in Psara's response to the Advantage Defendants "Motion for Referral to Arbitration." See Doc. No. 30. However, the court will address Psara's argument that it is suing the Advantage Defendants, and its predecessor Geden Holdings, Ltd. (Geden), under the performance guarantee which, unlike the charter party, does not contain an arbitration clause. Doc. No. 38, at 5. As Magistrate Judge Hawthorn stated at the hearing on the pending motion, Psara waived this argument because it was not briefed in their response (Doc. No. 30) but was raised for the first time at the hearing. See Doc. Nos. 34, 39-1 at 26. See e.g., Nichols v. Enterasys Networks, Inc. , 495 F.3d 185, 190 (5th Cir. 2007) (stating that inadequately briefed issues are considered waived); DIRECTV, Inc. v. Budden , 420 F.3d 521, 525–26 (5th Cir. 2005).

Even if Psara did not waive this argument, it is without merit. By its own terms, the performance guarantee "[is] just available" unless and until Psara presents a certified copy of the final arbitration award to Geden. Performance Guarantee, Doc. No. 1-1, at 31. Psara has not alleged nor provided any evidence in the record this has taken place. This particularly highlights the importance of staying these proceedings pending the ongoing arbitration. Notwithstanding the premature nature of such a suit, the parties also agreed in the performance guarantee that it is governed by and construed in accordance with the laws of England and consented to submit themselves to the non-exclusive jurisdiction of the English High Court. Doc. No. 1-1, at 32. Lastly, although not entirely clear, it appears that Psara is already involved in arbitration proceedings against Geden,¹ who "is not a signatory to the bareboat charter party; it is a signatory to the performance guarantee." Doc. No. 38, at 5.

Accordingly, after considering Psara's objections, the court finds they are without merit and that Judge Hawthorn's findings and conclusions are correct.

It is, therefore, ORDERED that the report and recommendation of the magistrate judge (Doc. No. 37) is ADOPTED , the Advantage Defendants' "Motion for Referral to Arbitration" (Doc. No. 29) is GRANTED , and the parties are directed to arbitrate their dispute as outlined in the charter party.

It is further ORDERED that this case is administratively closed, but this court retains jurisdiction to enforce any arbitration award. See 9 U.S.C. §§ 8, 207. All other pending motions are denied as moot.

REPORT AND RECOMMENDATION GRANTING DEFENDANT ADVANTAGES' MOTION FOR REFERRAL TO ARBITRATION

Zack Hawthorn, United States Magistrate Judge

This case is assigned to the Honorable Marcia A. Crone, United States District Judge, and referred to the undersigned United States Magistrate Judge for pretrial management. The Defendants, Advantage Arrow Shipping, LLC, Advantage Holdings, LLC, Advantage Tankers, LLC, and Forward Holdings, LLC, (collectively the Advantage Defendants), filed a "Motion for Referral to Arbitration," which is currently pending before the court. Doc. No. 29. The undersigned recommends granting the motion, directing the parties to arbitration, and staying the case pending resolution of the arbitrable issues.

I. BACKGROUND

On April 20, 2018, Plaintiff Psara Energy, Ltd. (Psara) filed suit for breach of contract against the Advantage Defendants pursuant to FED. R. CIV. P. 9(h), Rule B of the Supplemental Rules for Certain Admiralty and Maritime Claims (Rule B), and the Federal Arbitration Act, 9 U.S.C. §§ 4, 8 in aid of maritime arbitration. Doc. No. 1, at 1–2. In their complaint, Psara alleges that they entered into a bareboat charter party agreement with Defendant Space Shipping, Ltd. (Space Shipping) on February 23, 2010 to charter the CV STEALTH vessel. Id. at 5. Through a subsequent amendment to the bareboat charter party on June 2, 2010, Geden Holdings, Ltd. became the performance guarantor of Space Shipping. Id. Despite Space Shipping's obligation to maintain and keep up-to-date classifications on the vessel, they allegedly failed to do so. Id.

In 2014, the CV STEALTH was detained in Venezuela for more than three years by prosecutorial authorities, and Space Shipping failed to return the ship by the latest contractual redelivery date of June 22, 2015. Id. at 7. When the CV STEALTH was finally released from Venezuela, it was out-of-class and so extensively damaged due to neglect that it was incapable of sailing and in need of extensive repairs. Doc. No. 1 at 8. Space Shipping towed the CV STEALTH to Trinidad where Psara took possession on March 24, 2018. Id. Due to extensive damage to the CV STEALTH, Psara initiated a London maritime arbitration claim for damages equivalent to the repaired market value of the ship ($18,000,000.00) and amounts for unpaid charter hire, legal costs, interest, and other costs (an additional $1,860,063.80). Id. at 10, 25. Due to the transfer of a vessel fleet from Geden Holdings, Ltd. to other corporate entities (including the Advantage Defendants), Psara brought suit against the current slate of Defendants under fraudulent transfer and corporate succession theories. See generally id.

Accordingly, on April 20, 2018, Psara filed a "Motion for Writ of Maritime Attachment and Garnishment" of the Advantage Defendants' vessel, the ADVANTAGE ARROW. Doc. No. 3 at 2. In their motion, Psara showed a valid admiralty claim existed against the Advantage Defendants, who could not be found within the district but that their property (the ADVANTAGE ARROW) could be, and that there was no statutory or maritime bar to the attachment. Id. As a result, this court issued an order of maritime attachment due to Psara satisfying the filing and service requirements of Rules B and E to initiate a Rule B attachment proceeding. Doc. No. 4.

Concurrent with this court's Rule B attachment proceeding, on April 20, 2018, Psara also filed a motion in the Eastern District of Louisiana for the issuance of process of maritime attachment and garnishment of another one of the Advantage Defendants' vessels, the MT ADVANTAGE START. See Psara Energy, Ltd. v. Space Shipping, Ltd. et al. , C.A. No. 2:18-cv-04111-ILRL-JCW, Doc. No. 28. Following the seizure of the MT ADVANTAGE START, Psara filed a motion to transfer venue of the Rule B attachment proceeding for the MT ADVANTAGE START from the Eastern District of Louisiana to this court. Id. The Eastern District of Louisiana granted the motion to transfer under 28 U.S.C. § 1404(a) and the action consolidated into a single proceeding before this court.

On June 15, 2018, the Advantage Defendants filed the pending "Motion for Referral to Arbitration" arguing that Psara's claims all allegedly arise from the charter party between Psara and Space Shipping, which contains a valid and enforceable arbitration clause. Doc. No. 29. The Advantage Defendants claim that Psara's current arbitration proceedings against Space Shipping should include the Advantage Defendants, particularly because Psara claims that the Advantage Defendants are a successor to Space Shipping and therefore liable for losses incurred by Psara under the charter party. Id. However, Psara contends that the Advantage Defendants cannot compel this matter to the London arbitration because the Advantage Defendants are not signatories to the charter party that contains the arbitration agreement. Doc. No. 30 at 5.

II. LEGAL STANDARD

Congress's enactment of the Federal Arbitration Act (FAA) "embodies the national policy favoring arbitration and places arbitration agreements on equal footing with all other contracts." See Buckeye Check Cashing, Inc. v. Cardegna , 546 U.S. 440, 443, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006). Chapter One of the FAA makes written arbitration agreements in any maritime transaction or contract "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2 (West 2017). The charter party particularly at issue here is specifically included in the FAA's definition of a "maritime transaction." See 9 U.S.C. § 1. Simply put, the FAA creates substantive federal...